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Gender and money: Savings are not created equal

Men earn more and save more, while women may need more for child-care and health costs

By Jonnelle MarteThe Washington Post

Posted:
06/01/2014 11:50:00 PM MDT

Updated:
06/01/2014 11:52:09 PM MDT

Feed the piggy bank (Thinkstock, The Denver Post)

WASHINGTON — Women are just as likely to put away money for retirement as men — but they are way behind their male counterparts in total savings, a new study shows.

Men had an average of $139,467 in individual retirement accounts as of 2012, compared with an average of $81,700 for women, according to a report released last week by the Employee Benefit Research Institute, a Washington-based organization that focuses on health, savings and retirement issues.

Women moved money into their IRAs just as often as men did, the study found. This was true for IRAs overall, in which 10.9 percent of accounts that received contributions in 2012 are held by women and 10.8 percent by men; for Roth IRAs, which require contributions of after-tax dollars; and for traditional IRAs, which can include tax-deductible contributions.

Although women are just as likely to add to IRA accounts as men, they make smaller contributions on average. In 2012, female IRA account holders contributed an average of $3,995, compared with an average of $4,023 by men, according to the EBRI study. The difference is slight, but the pattern held true for most age groups, according to the study.

A couple of factors could explain those smaller contribution amounts, said Craig Copeland, an EBRI senior research associate. Some married women may make joint IRA contributions with their spouses, and those accounts may be under their husband's names, he said.

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But the most likely reason, he said, is not surprising: Women make less on average than men. Women earned about 77 cents for every dollar earned by men in 2012, according to the latest data from the Census Bureau. That was unchanged from the year before and not much higher than the 61 cents women made for every dollar earned by men in 1960.

The wage gap, however, is smaller than the nearly 40 percent divide in retirement savings balances between men and women, hinting that there is something else at play. Some women may be limited in how much they can put away for retirement because of other financial responsibilities, such as single mothers delaying retirement savings to cover child-care costs and some women deciding they would rather set aside money for a home.

Investing habits may also play a role in determining why women have smaller balances overall, but there isn't enough evidence on gender-based investing preferences in retirement accounts to show decisively that women are more conservative than men, Copeland said. Some studies show that women can be as aggressive with their investments as men of similar means, he said.

A look at asset allocations in IRAs in 2011 showed that men and women made nearly identical appropriations in bonds, stocks and cash. But women had more money allocated to balanced funds, which invest in both stocks and bonds, while men were more likely to invest in other asset classes.

What makes the savings gap especially troublesome is that women generally need more savings than men to cover health-care expenses, because they tend to live longer.

Life expectancy could partly explain a shift that happens in later years, Copeland said. In 2012, men made bigger average contributions to IRAs for all age groups except savers over 70, when the average contribution of $4,644 made by women topped the average of $4,632 by men. That change could be a sign that women are more able than men to work in old age, he said.

Still, Copeland said, he is optimistic that women can catch up. "I would think, as women continue to become a larger percentage of the labor force and have higher incomes, that you would expect that this gender difference would go away," he said.

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